Legal Assignment Solution (Doc)

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Added on 2020-03-16

Legal Assignment Solution (Doc)

Added on 2020-03-16

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Running head: LEGAL ASSIGNMENTLegal AssignmentName of the StudentName of the UniversityAuthor Note

1LEGAL ASSIGNMENTA corporation has been accorded with the status of a corporate person having a separatelegal entity of its own. The status of separate legal entity empowers the corporation with thelegal powers and capacity of an individual, which includes the right of the company to enter intocontracts on its own behalf. This legal capacity is exercised through an agent who is granted theauthority to enter into a contract on behalf of the company1. If the corporation does not grantauthority to the agent, any contract entered into by such agent becomes void. The corporationmay grant either an actual authority or an ostensible authority on the agents, which is discussedin the essay. The directors of the company are the agents of the company who are entitled to act onbehalf of the company known as the principal. The function of the agent is to enter into contractswith third parties on behalf of the company2. The directors being the agent of the company areobligated to act in good faith and in the best interest of the company. In case of a breachcommitted by an authorized agent, the principal shall be entitled to compensation for the losssuffered for such breach. The directors must ensure that the business activities and the financialtransactions of the company are debarred of any financial risks. The agency relationship may arise in respect of employer and employee as well where theemployer is the master and the employee is the servant and is entitled to act on behalf of themaster in good faith. In the agency relationship between the employer and the employee, anemployee must be authorized to bind its employer for his actions or omissions3. An agent may beconferred with either actual authority or an ostensible authority. An actual authority includes an1 Bennett, Howard. Principles of the Law of Agency. Bloomsbury Publishing, 2014.2Wigmore, John Henry.Wigmore on evidence. Wolters Kluwer, 2016.3Appleman, John Alan, Jean Appleman, and Eric Mills Holmes.Contract Concerns: Reinsurance ContractFormation, Validity, And Judicial Construction. Vol. 14. Appleman on Insurance Law and Practice, 2016.

2LEGAL ASSIGNMENTexpress authority and implied authority to be granted to the agent. The express authority is whenthe principal expressly authorizes the agent act on its behalf either verbally or in writing. Animplied actual authority is when agents performs activities that is necessary and incidental to theduty conferred upon him as was observed in Hely Hutchinson v Brayhead Ltd4. In this case, theagent was appointed to manage a business had an implied authority to enter into contracts thatany manager in his position would have entered into. If the conduct or words of the principal is such that it makes a representation before thethird party that the agent is authorized to deal with the third parties on behalf of the principal,when in fact, the agent is not authorized, the agent is said to have an ostensible or apparentauthority5. If the third party rely on the representation of the principal and enters into a contractwith the agent, the principal shall be bound by the contract as was ruled in Freeman andLockyer v Buckhurst Park Properties (Mangal) Ltd6. In Armagas Ltd v Mundogas SA7, thecourt ruled that when the agent does not have any authority to enter into transactions but falselyrepresented to be authorized before the third parties, the principal shall not be bound by theconduct of the agent. As per the general rule of agency, an agent cannot bind its principal for actsdone outside their authority unless the principal has ratified such act as an act done within theauthority conferred upon the agent by the principal.The first issue arising in the given scenario is what legal relationship Lena shares withRowan and Cole. Lena and Rowan are the directors of the ‘Glasshouse Enterprises’ and givesrise to the agency relationship where the company is the principal and Lena and Rowan are4 [1968] 1 QB 549.5Allen, William T., and Reinier Kraakman.Commentaries and cases on the law of business organization. WoltersKluwer law & business, 2016.6 [1962] 2 QB 480.7 [1985] UKHL 11.

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Legal Assignment Solution (Doc)